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The density dilemma

Jun 13, 2017

FIDI discusses the relevance of the 6.5 density factor for household goods in the modern world.

At the FIDI conference in Dubai, six panellists – including Jesse van Sas from FIDI as facilitator - tried to get to grips with the tricky subject of density. The panellists all looked at the problem from their own perspectives: Gordon Bell from Asian Tigers represented the large corporate movers; Derrek Young from BGRS represented the Relocation Management Company’s (RMC) position; Geoff Watson from Doree Bonner is a private and domestic mover based in the UK; Derek Duffy from Armstrong in Canada gave the North American perspective; and Phil Wells from JK Moving in Washington DC focussed on the problem as a US government mover.

By way of introduction, Jesse explained that the recent changes in the SOLAS regulations and the rise in the influence of RMCs had disrupted the status quo for movers. For years, the world had used a constructed weight of 6.5 lbs/cu ft for household goods shipments; now that every shipment has to be weighed to produce a Verified Gross Mass (VGM), and RMC accountants were checking for any anomalies, discrepancies were obvious. Clients were only prepared to pay for the actual weight, yet original costings had been done by the origin agent based on a higher expected figure.

In a recent survey conducted by FIDI with movers, the average density came out at 5.9lbs/cu ft. This, in effect, reduces the chargeable weight by around 10%, a figure that most companies would be unable to absorb.

Geoff Watson said that in his business he didn’t have a problem. Every job was quoted individually and based upon the volume and the complexity of the move. It was not fair to charge on the weight. The problem, however, is for companies that tender for contracts. These companies need to have a basis on which to quote and, in the USA, this has always been on weight; elsewhere, volume has been preferred. Americans prefer to use weight as access to weigh bridges is easy and weight cannot easily be disguised: the weight is the weight. Although volume is more relevant to the pricing of the job, if a company were being paid on the packed volume it would be easy to misrepresent it by overpacking.

The six panellists debated the problem which has been highlighted, largely, by accountants who are employed by RMCs to identify any anomalies. It is they who are taking an ever-increasing share of the business and are making the rules.

Derek Duffy said that the nature of the business had changed with people no longer having heavy furniture, record collections or libraries of books in their shipments. It was understandable, therefore, that the density of shipments had reduced. Gordon Bell was, however, nervous about making a general change in the density factor as this would require all rates to change and might spark off a series of new RFPs (Requests for Proposal) from corporations.

There was some discussion about teaching surveyors to estimate actual weight, not volume. Although this was possible, it would not work as the overall cost of the job would not change and the problem related specifically to shipments that were quoted in advance by fixed tender. The volume of the shipment had always to be assessed anyway as it had to fit within the confines of the container.

Derek Duffy said that every region needs to agree its own density based on the local shipment characteristics. “Every industry has pressures on profits,” he said. “There are pricing pressures on every industry. Are we clever enough to adjust and be flexible or are we going to stay the way it is and moan about costing and volume. The landscape is changing and we have a choice to make.” The aim, of course, is to reduce the discrepancy between the quoted rate, which takes into account the costs of sale and the actual verified weight on which invoices are paid. The lower the density factor, the higher the rate/100 lbs needs to be. Take it too low and it’s unlikely that RMC auditors will be willing to pay extra.

From the audience, Dale Collins from Graebel asked if the panel thought technology could help. He said that if we could use technology to cost every job separately, it would do away with the need to have a rate schedule. Phil Wells said he didn’t know if the idea was practical. Gordon Bell said the idea of handing over the responsibility for assessing volumes to the customer, through the use of technology, “scared the hell” out of him. Derrek Young said that anything that provided greater transparency to the industry was a good thing.

The panel did not come to a conclusion but, in fairness, it was unlikely to. Derrek Young said that the American industry would continue to weigh shipments whatever happened. The discussion did, however, start the debate. Clearly the practice of quoting rates based on a misnomer, knowing that they will be checked, is nonsense. However, trying to agree upon an industry standard, and rolling it out worldwide in a way that does not cause total confusion, will be very hard to achieve.

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